not playing around
January 5, 2014 8:50 PM Subscribe
How do I pay taxes on the game show winnings I received?
I won about $15,000 on a game show in the US. The producers had mentioned having to pay taxes within a month of receipt and suggested consulting with a tax accountant. Knowledgeable relatives have told me that spending money to see a tax accountant would be a waste of money. But how do I pay the taxes? Is it possible that I can just report this as income come April? Or does it really have to be done immediately? I don't believe I received a reporting form at any point. If my bracket matters, my total income for 2013 including these winnings will have been somewhere in the realm of $30,000. Everything I can find online is all "surprise, you have to pay taxes on prizes won!" which is not relevant to my situation.
Thanks!
I won about $15,000 on a game show in the US. The producers had mentioned having to pay taxes within a month of receipt and suggested consulting with a tax accountant. Knowledgeable relatives have told me that spending money to see a tax accountant would be a waste of money. But how do I pay the taxes? Is it possible that I can just report this as income come April? Or does it really have to be done immediately? I don't believe I received a reporting form at any point. If my bracket matters, my total income for 2013 including these winnings will have been somewhere in the realm of $30,000. Everything I can find online is all "surprise, you have to pay taxes on prizes won!" which is not relevant to my situation.
Thanks!
IANAA but my guess is that you would have to pay your taxes on a quarterly schedule. This happens to people who for whatever reason are not withholding enough - apparently, the IRS does not like people to make a bunch of money and sit on it til the end of the year. In fact, it's my understanding that if you are found by the IRS to have been sitting on money all year that you should have paid quarterly that they will push you to pay quarterly going forward (that happens to people with capital gains income), I have a hard time believing they'd do that to someone that won money one time on a game show.
Actually, rather than pay a an accountant or a lawyer, why not call the IRS? I have never done so, but it's my understanding that they are pretty helpful on the phone, especially if you are trying to give them money.
posted by ill3 at 8:59 PM on January 5, 2014 [2 favorites]
Actually, rather than pay a an accountant or a lawyer, why not call the IRS? I have never done so, but it's my understanding that they are pretty helpful on the phone, especially if you are trying to give them money.
posted by ill3 at 8:59 PM on January 5, 2014 [2 favorites]
You need to fill out a form Form 1040-ES.
While there are forms and tables you can fill out, the actual part you send in is just your identifying information and the amount of the check.
Assume you won this in 2013. Dig up your 2012 tax return (that you would have filed in early 2013), look at the tax tables, and figure out how much more your taxes would have been had you earned an extra $15,000. Depending on how much you made, that number will be between $0 and ~$5800. If you're middle-class, it'll be around $3750. Send the IRS that much, preferably before January 15.
[Edit: Just saw your comment about making $30,000 including these winnings. That puts your total tax liability (assuming you're single) for 2013 at around $2600. You probably had almost nothing withheld on the other $15,000, so send the IRS a check for $2500.]
When you fill out your taxes later this year, include that amount in the "estimated tax payments" section.
If you don't send it in, and you wind up owing the IRS over $1000 come April 15, they'll assess a penalty equal to 10% of the excess. If you owe them $3000, that's an extra $200 they'll make you pay them.
Of course, if you normally get refunds in the $3000 range, you can ignore this. But if that's the case, you probably want to file a new W-4 with your employer and stop making big interest-free loans to the government.
You might need to do something similar with your state government.
posted by Hatashran at 9:07 PM on January 5, 2014 [4 favorites]
While there are forms and tables you can fill out, the actual part you send in is just your identifying information and the amount of the check.
Assume you won this in 2013. Dig up your 2012 tax return (that you would have filed in early 2013), look at the tax tables, and figure out how much more your taxes would have been had you earned an extra $15,000. Depending on how much you made, that number will be between $0 and ~$5800. If you're middle-class, it'll be around $3750. Send the IRS that much, preferably before January 15.
[Edit: Just saw your comment about making $30,000 including these winnings. That puts your total tax liability (assuming you're single) for 2013 at around $2600. You probably had almost nothing withheld on the other $15,000, so send the IRS a check for $2500.]
When you fill out your taxes later this year, include that amount in the "estimated tax payments" section.
If you don't send it in, and you wind up owing the IRS over $1000 come April 15, they'll assess a penalty equal to 10% of the excess. If you owe them $3000, that's an extra $200 they'll make you pay them.
Of course, if you normally get refunds in the $3000 range, you can ignore this. But if that's the case, you probably want to file a new W-4 with your employer and stop making big interest-free loans to the government.
You might need to do something similar with your state government.
posted by Hatashran at 9:07 PM on January 5, 2014 [4 favorites]
Assuming this was in California you will owe CA income tax on the winnings regardless of your state of residence.
posted by Gridlock Joe at 9:07 PM on January 5, 2014
posted by Gridlock Joe at 9:07 PM on January 5, 2014
You should receive a 1099-MISC, and you report it as 'other income' on your 1040. Publication 525 discusses it briefly: there's a distinction between gambling winnings where you stake your own money, and prizes where you don't, but they're all 'other income'.
According to this piece (and this one) if your show was made in California, like most of 'em, you also have to withhold California state income tax on the winnings, which may be what the producers were talking about.
Hatashran's right about the penalty for underpayment, but there's also a 'safe harbor' rule that spares you the IRS's wrath if your 2013 withholdings are at least as much as you paid in taxes in 2012.
posted by holgate at 9:16 PM on January 5, 2014 [2 favorites]
According to this piece (and this one) if your show was made in California, like most of 'em, you also have to withhold California state income tax on the winnings, which may be what the producers were talking about.
Hatashran's right about the penalty for underpayment, but there's also a 'safe harbor' rule that spares you the IRS's wrath if your 2013 withholdings are at least as much as you paid in taxes in 2012.
posted by holgate at 9:16 PM on January 5, 2014 [2 favorites]
Knowledgeable relatives have told me that spending money to see a tax accountant would be a waste of money.
You can do this, but honestly if you've only ever been in a more standard tax situation before, I think it's very worth it to pay an accountant in order to figure out what you really owe and how best to pay it. I've received similar "helpful advice" from relatives (they also said stuff like "can't you just not tell the IRS?" ugh), but none of them have been in a position of bringing in significant freelance income. We pay our accountant about $400 a year and not only do they tell us exactly how much to pay both state and locally, but they also send reminders, prepare receipt booklets--essentially take me through every step of paying quarterly so that I don't have to owe. If you at all have the feeling that you're in over your head with this, and I did, I think it's worth it to pay a tax professional.
posted by PhoBWanKenobi at 9:19 PM on January 5, 2014 [4 favorites]
You can do this, but honestly if you've only ever been in a more standard tax situation before, I think it's very worth it to pay an accountant in order to figure out what you really owe and how best to pay it. I've received similar "helpful advice" from relatives (they also said stuff like "can't you just not tell the IRS?" ugh), but none of them have been in a position of bringing in significant freelance income. We pay our accountant about $400 a year and not only do they tell us exactly how much to pay both state and locally, but they also send reminders, prepare receipt booklets--essentially take me through every step of paying quarterly so that I don't have to owe. If you at all have the feeling that you're in over your head with this, and I did, I think it's worth it to pay a tax professional.
posted by PhoBWanKenobi at 9:19 PM on January 5, 2014 [4 favorites]
If the statement that comes after "An accountant would be a waste of money" is "How do I pay the taxes?" then your relatives are not that knowledgable. If that's your question, you really need an accountant.
posted by bleep at 9:48 PM on January 5, 2014 [11 favorites]
posted by bleep at 9:48 PM on January 5, 2014 [11 favorites]
Your knowledgeable relatives are wrong.
Use Angie's list or talk to friends who own small businesses and get a CPA.
You're not talking just federal taxes --- there are state taxes, too, and random state forms that you probably wouldn't ever fill out otherwise.
Just pay the good accountant to do these taxes this one year.
posted by zizzle at 4:29 AM on January 6, 2014 [2 favorites]
Use Angie's list or talk to friends who own small businesses and get a CPA.
You're not talking just federal taxes --- there are state taxes, too, and random state forms that you probably wouldn't ever fill out otherwise.
Just pay the good accountant to do these taxes this one year.
posted by zizzle at 4:29 AM on January 6, 2014 [2 favorites]
You actually may fall under the loophole where you do not need to pay estimated taxes provided that the withholding for the current year exceeds 100% of the previous year's taxes. You just have to settle up before April 15 of the next year, when you file that year's taxes.If you want to send in money now to make yourself feel better, feel free to use Form 1040-ES and do so, but based on the information you have provided, it is not required.
With a $15,000 payment, you will be assured of receiving a 1099 before February 15 of the year following the one where you received the income.
Producers always have to give the standard "check with your tax advisor" disclaimer. The lawyers require that. However, most people don't have a tax advisor, at least anything beyond the computer or someone at H&R or Jackson Hewitt who I wouldn't trust with an answer to this question, so if you have further questions, just pick up the phone and call the IRS.
In California there are no "random state forms" to fill, since prizes issued by private parties are taxable the same. If you live in another state there may be a California non-resident form that needs to be filled, which would credit the taxes owed to another state based on that income, should that state levy an income tax.
Overall taxes are way more complicated than people make out to be. Follow the directions on the forms that you receive, and if you do not receive a 1099, contact the issuer as it may have been lost in the mail. Report the income as "other income" on Form 1040. If it makes you feel better, pay about 20% of the income on a 1040-ES before April 15 this year.
posted by calwatch at 4:31 AM on January 6, 2014
With a $15,000 payment, you will be assured of receiving a 1099 before February 15 of the year following the one where you received the income.
Producers always have to give the standard "check with your tax advisor" disclaimer. The lawyers require that. However, most people don't have a tax advisor, at least anything beyond the computer or someone at H&R or Jackson Hewitt who I wouldn't trust with an answer to this question, so if you have further questions, just pick up the phone and call the IRS.
In California there are no "random state forms" to fill, since prizes issued by private parties are taxable the same. If you live in another state there may be a California non-resident form that needs to be filled, which would credit the taxes owed to another state based on that income, should that state levy an income tax.
Overall taxes are way more complicated than people make out to be. Follow the directions on the forms that you receive, and if you do not receive a 1099, contact the issuer as it may have been lost in the mail. Report the income as "other income" on Form 1040. If it makes you feel better, pay about 20% of the income on a 1040-ES before April 15 this year.
posted by calwatch at 4:31 AM on January 6, 2014
as others have said, the issue here is the quarterly estimate and making sure you don't get dinged by the penalty on underpayment of estimated income tax. if your 2013 withholding was equal to or greater than your 2012 tax, then you're in the safe harbor. if you didn't have tax in 2012, then you're good to go until tax day (when it'll just be other income on your 1040. you'd just add the amount to the other income line, attach a statement 1 that notes that the amount is game show winnings).
if your withholding for 2013 is less than 2012 tax, a payment is due by January 15 (that's the postmark date, FTR)
but! don't rely on internet commenters. set aside a few hours and read IRS junk. you can start at pub 505:
http://www.irs.gov/publications/p505/ch02.html#en_US_2013_publink1000194557
other commenters have addressed the state issue: you'll probably owe tax to CA and will take a "resident credit" on your home state. (usually a hypothetical amount equal to the amount of resident state tax that would be due on the winnings.)
posted by jpe at 5:05 AM on January 6, 2014
if your withholding for 2013 is less than 2012 tax, a payment is due by January 15 (that's the postmark date, FTR)
but! don't rely on internet commenters. set aside a few hours and read IRS junk. you can start at pub 505:
http://www.irs.gov/publications/p505/ch02.html#en_US_2013_publink1000194557
other commenters have addressed the state issue: you'll probably owe tax to CA and will take a "resident credit" on your home state. (usually a hypothetical amount equal to the amount of resident state tax that would be due on the winnings.)
posted by jpe at 5:05 AM on January 6, 2014
When I received my Big Ol' Check, it already had California taxes taken out of it. I paid an accountant to take care of the rest at tax time. (I think the original check took about $15k off and another $11k or so went away with my regular tax return. Moreover, I am the kind of person who has otherwise never had to pay at tax time, so I wanted to make sure that I did it right.) As others have mentioned, there's a section for gambling or other winnings -- something like that.
While it is certainly possible to take care of this while doing your own taxes, I STRONGLY urge you to have a pro do it, just this year. Here's why: the IRS, in their infinite wisdom, sent me a letter a year after filing that original set of taxes saying that I owed them $11k more because I hadn't reported it as "self-employment." The gist, I believe, was that I hadn't paid taxes on office rent, not paid into Social Security... stuff like that.
Because I had paid a licensed, insured CPA, he was able to open the tax code in front of me and point directly at the spot they'd gotten wrong, then write them back and tell them to go piss up a rope. If he had been wrong, I believe that his insurance would have covered the difference; I had paid him to do a complete, accurate job.
So do spend a little more money and get a good CPA. That was a scary moment I would prefer to never relive, but it all worked out okay.
posted by Madamina at 6:07 AM on January 6, 2014 [4 favorites]
While it is certainly possible to take care of this while doing your own taxes, I STRONGLY urge you to have a pro do it, just this year. Here's why: the IRS, in their infinite wisdom, sent me a letter a year after filing that original set of taxes saying that I owed them $11k more because I hadn't reported it as "self-employment." The gist, I believe, was that I hadn't paid taxes on office rent, not paid into Social Security... stuff like that.
Because I had paid a licensed, insured CPA, he was able to open the tax code in front of me and point directly at the spot they'd gotten wrong, then write them back and tell them to go piss up a rope. If he had been wrong, I believe that his insurance would have covered the difference; I had paid him to do a complete, accurate job.
So do spend a little more money and get a good CPA. That was a scary moment I would prefer to never relive, but it all worked out okay.
posted by Madamina at 6:07 AM on January 6, 2014 [4 favorites]
When I won dough on a game shows, I got a 1099. My winnings were smaller than yours, but I merely reported them on my regular income taxes.
You may want to spend $100 to discuss this with a CPA. I have found that with weird stuff like this, it's worth it.
Ask among your friends, someone knows a good CPA and can turn you onto him or her.
posted by Ruthless Bunny at 7:27 AM on January 6, 2014
You may want to spend $100 to discuss this with a CPA. I have found that with weird stuff like this, it's worth it.
Ask among your friends, someone knows a good CPA and can turn you onto him or her.
posted by Ruthless Bunny at 7:27 AM on January 6, 2014
IAAA. Oy vey, you don't need to pay a CPA or a strip mall tax preparer. Call the IRS and they will direct you to the appropriate forms on the IRS website, and likely talk you through it. Or, you can get free in-person help through the VITA program. The VITA volunteers should be able to help you with your state income tax, too.
I would do it sooner rather than later in your case, since you know you owe, and the IRS looks kindly on people who pay well before April 15th.
By the way, you are going to owe self-employment tax in addition to the income tax.
posted by stowaway at 9:34 AM on January 6, 2014 [1 favorite]
I would do it sooner rather than later in your case, since you know you owe, and the IRS looks kindly on people who pay well before April 15th.
By the way, you are going to owe self-employment tax in addition to the income tax.
posted by stowaway at 9:34 AM on January 6, 2014 [1 favorite]
By the way, you are going to owe self-employment tax in addition to the income tax.
No, you most certainly won't. There is a bit of grey area between incidental income and a business, but a one-time show prize would generally not be considered self-employment if game shows are not your regular job.
You would simply list the winnings as Other Income on line 21 of your Form 1040. Write on that line "Game show prize 1099-MISC." This is to avoid the IRS letter that Madamina mentioned above. You will be receiving a 1099-MISC which is also reported to the IRS. By default, the IRS considers all 1099-MISC income to be self-employment and requiring self-employment tax unless it receives another explanation. However, in this case, it is not self-employment income and even if you get the letter from the IRS, you can reply to that letter explaining that this is incidental game show income.
This should make your income tax no more complicated than previous years since you will just be entering one more number on line 21 of Form 1040.
posted by JackFlash at 10:26 AM on January 6, 2014 [2 favorites]
No, you most certainly won't. There is a bit of grey area between incidental income and a business, but a one-time show prize would generally not be considered self-employment if game shows are not your regular job.
You would simply list the winnings as Other Income on line 21 of your Form 1040. Write on that line "Game show prize 1099-MISC." This is to avoid the IRS letter that Madamina mentioned above. You will be receiving a 1099-MISC which is also reported to the IRS. By default, the IRS considers all 1099-MISC income to be self-employment and requiring self-employment tax unless it receives another explanation. However, in this case, it is not self-employment income and even if you get the letter from the IRS, you can reply to that letter explaining that this is incidental game show income.
This should make your income tax no more complicated than previous years since you will just be entering one more number on line 21 of Form 1040.
posted by JackFlash at 10:26 AM on January 6, 2014 [2 favorites]
JackFlash -- exactly. The point was that participation on a game show was incidental and not a continuing method of earning money. (That can also separate it from gambling winnings, since some people do use gambling as their primary source of income.)
I don't think declaring it with a 1099-MISC is what we went with, but -- again -- that's why I went with a CPA. He wasn't anyone special, just the independent guy who had been working on my parents' interminable knot of crap. But he knew enough to know EXACTLY where to look.
posted by Madamina at 11:20 AM on January 6, 2014
I don't think declaring it with a 1099-MISC is what we went with, but -- again -- that's why I went with a CPA. He wasn't anyone special, just the independent guy who had been working on my parents' interminable knot of crap. But he knew enough to know EXACTLY where to look.
posted by Madamina at 11:20 AM on January 6, 2014
Oh, goodness, that's right. Just one more reason for people not to get tax advice on the internet.
posted by stowaway at 11:20 AM on January 6, 2014 [1 favorite]
posted by stowaway at 11:20 AM on January 6, 2014 [1 favorite]
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I just waited till it was tax time the following year and then paid when I filed my taxes via the 1099 forms they sent me. It was just like paying taxes on any other self-employment/freelance income. If you've never been through that before, though, you may want to find a tax accountant who has experience with it.
You will report it as income in whatever year you actually received the check. I taped my game show in July, it aired in October, and I got money in February of the following year. I paid taxes on that money when I paid taxes on all the rest of my income for that year, not the year I actually taped.
posted by Sara C. at 8:56 PM on January 5, 2014 [1 favorite]